How 14 States Have Designed Pharmacy Assistance Programs

Transcription

1 How 14 States Have Designed Pharmacy Assistance Programs by John Hansen T his chapter overviews programs in 14 states which were providing prescription drug benefits for 760,000 elderly and other low-income people in Most states have income limits ranging from 100% to 225% of the Federal Poverty Level. Two-thirds of the programs are funded with state general revenues, but nine receive funds from such sources as a cigarette tax, construction tax, tobacco settlement, and the lottery. Beneficiary costsharing varies among the states with copayments and coinsurance more common than benefit caps and deductibles. Nine of the 14 states administer their programs through the agency administering Medicaid. However, the three largest programs are intentionally administered separately to avoid any perceived stigma of programs for low income people. Prescription drugs have become an increasingly important part of health care, especially for older adults. Yet, the federal Medicare program, with few exceptions, does not pay for outpatient prescription drugs. More than two-thirds of Medicare beneficiaries had some other source of prescription drug coverage in 1996, but for many, insurance pays only a fraction of their drug costs. The other one-third of Medicare participants must pay for all prescription drugs entirely out of pocket. Some seniors have prescription drug coverage through Medigap, an optional supplemental policy. Only 3 of the 10 standard plans cover prescription drugs and they typically requires a $250 deductible, 50% coinsurance, and have annual limits of $1,250 or $3,000 on drug expenditures. Medicare beneficiaries are often vulnerable to high prescription drug costs because they need more prescription drugs, compared with other segments of the population. To fill insurance gaps for some low-income older adults, several states have enacted independent, state-funded programs to provide prescription drug coverage. A number of states have also implemented, considered implementing, or changed existing drug assistance programs for older adults and other low-income residents. Looking at the design and implementation of these state programs provides useful information about how states provide drug benefits to certain populations. This study, conducted from November 1999 to August 2000, looked at state programs that provide prescription drug benefits. It provides information on policies, design features, and operations of each. The report is based on relevant laws, regulations, program information, and, in some states, interviews of senior citizen advocates. Wisconsin Family Impact Seminars 13

2 Which States Were Involved in the Study? In 1999, 14 states operated independent, state-funded and administered programs that provided more than 760,000 elderly and other low-income people with prescription drug access. Three states New York, Pennsylvania, and Vermont had more than one pharmacy program, bringing the total number of programs to 18. The first programs for low-income Medicare beneficiaries to get prescription drug coverage began in Maine and New Jersey in Maryland s program began in In the 1980s, eight more states Connecticut, Illinois, Michigan, New York, Pennsylvania, Rhode Island, Vermont, and Wyoming added prescription drug programs. Eleven states enacted programs between 1996 and 2000 including Delaware, Massachusetts, and Minnesota. In 1999 alone, seven states expanded or added programs. New state programs in Florida, Indiana, Kansas, Michigan, Nevada, and South Carolina were not fully operational at the time of this report. Most programs began within a year of enactment. The income limits for prescription drug programs in 1999 ranged from 100% of the Federal Poverty Level to 225%. How Have States Established Eligibility? States use age, income, and other criteria to target and control the size of their drug assistance programs (See Table 1). Most states target their limited budgets to low-income seniors and people with disabilities who do not qualify for Medicaid drug coverage. Eligibility rules, however, vary across states. For instance, programs in Maryland and Wyoming have no minimum age requirements, whereas Maine requires participants to be at least 62. All but three programs required participants who are not disabled to be at least 65. Most have income requirements, often tied to the Federal Poverty Level (FPL) which is used to determine eligibility for many federal programs. The 1999 Federal Poverty Level for an individual was $8,240. The income limits for prescription drug programs in 1999 ranged from 100% of FPL to 225%. However, Illinois recently expanded eligibility to individuals with annual incomes up to $21,218, and Massachusetts recently enacted a new catastrophic program with no upper income limit and sliding scale payments for those above 188% of FPL. Rhode Island recently expanded eligibility to individuals with incomes up to $34,999. That program will pay 60% of drug costs for those with incomes up to $15,932; 30% for those with incomes up to $19,999; and 15% for those with incomes up to $34,999. Most states have some mechanism to increase the qualifying income each year. Four states raise income requirements based on the annual Social Security costof-living adjustment. Seven states set qualifying income levels as a percentage of the FPL. Two states have no cost-of-living adjustment. For example, the income thresholds for Pennsylvania s PACE and PACENET were fixed by state statute in 1996 and cannot be changed without legislative action. According to Director Tom Snedden, this was a deliberate action by the legislature to contain costs. The income threshold in PACE and PACENET have become lower in real dollars each year, which has made some people lose eligibility as their Social Security income increased. 14 How 14 States Have Designed Pharmacy Assistance Programs

3 Table 1. Eligibility Requirements for State Pharmacy Assistance Programs, 1999 State Individual income limit (percentage of 1999 FPL) Married or household income limit Age requirement Coverage for persons with disabilities Enrollment Enrollment as a share of Medicare beneficiaries in state (percentage) Connecticut $14,500 (176) $17, Yes 29,969 6 Delaware $16,480 (200) $22, Yes N/A N/A Illinois $16,000 (194) $16, Yes 49,186 3 Maine $15,244 (185) $20, Yes 25, Maryland $9,400 (114) $10,200 None Yes 33,185 5 Massachusetts $12,360 (150) N/A 65 Yes 27,492 3 Michigan $12,360 (150) $16, No 12, Minnesota $9,660 (117) $13, No 1, New Jersey $18,151 (220) $22, Yes 195, New York - Fee and Deductible Plans Pennsylvania- PACE Pennsylvania- PACENET $18,500 (225) $24, No 113,000 4 $14,000 (170) $17, No 217, $16,000 (194) $19, No 18, Rhode Island $15,538 (189) $19, No 29, Vermont-VHAP $12,360 (150) $16, Yes 7,303 8 Vermont- VScript $14,420 (175) $19, Yes 2,125 2 Vermont-VScript Expanded $18,540 (225) $24, Yes N/A N/A Wyoming $8,240 (100) $11,060 None Yes Notes: N/A = Not available. FPL = Federal Poverty Level. Sources: State programs, National Conference of State legislatures, drugaid.htm (downloaded 01/26/2000 and 04/04/2000), (downloaded 06/27/2000), and (downloaded 06/27/2000). Wisconsin Family Impact Seminars 15

4 Some states make exceptions to income limits if drug expenses exceed 40% of income. In addition to income, Michigan requires an enrollee s monthly prescription drug expenses to be above 8% of their monthly income if the person is married, or 10% if the person is single or widowed. Recognizing that strict income limits might exclude some people who need assistance, Maine and Delaware make exceptions for people with drug expenses above 40% of their income. Three states also have asset limits. All states restrict eligibility to state residents, although residency requirements differ. Most states allow people with other drug coverage to enroll, but specific rules vary. Almost two-thirds of programs had eligibility criteria that allow some people with disabilities to be eligible for assistance. The definition of disabled, for the purpose of program eligibility, varies across states. For example, in Illinois, a resident with a disability must be older than 16, while in Maine, a resident with a disability must be at least 19 years old. A few states defined people receiving or eligible for Social Security disability insurance as disabled, whereas other states used state-developed criteria. How Large Were the State Programs? Just as eligibility criteria varied, the size of state programs also varied. The Rhode Island program enrolled the largest percentage of state Medicare beneficiaries. However, programs in New Jersey, New York, and Pennsylvania had the most people enrolled, accounting for 71% of all enrollees in According to Director Tom Snedden, Pennsylvania s PACE and PACENET programs cost about $1 million per day in 2000 with annual expenditures of about $1400 per person. Some states have modified their programs over time. Maine changed its income threshold from 131% to 185% of the federal poverty level (FPL). The Massachusetts program began with an income threshold of 133% of the FPL, which has since been increased to 188%. Pennsylvania and Vermont added coverage for people with higher incomes, and Connecticut and Massachusetts extended coverage to people with disabilities. Vermont has established limits on the types of drugs that are covered. Did States Restrict the Type of Drugs Covered? In addition to targeting coverage to meet income requirements, some states restrict coverage to specific types of drugs, such as maintenance drugs or drugs to treat specific conditions (See Table 2). For instance, states generally do not cover drugs for which they do not get manufacturer rebates, although Illinois and Michigan are exceptions. Connecticut recently eliminated coverage for antihistamines, decongestants, and smoking cessation products. Michigan limits prescription coverage to three months per year. 16 How 14 States Have Designed Pharmacy Assistance Programs

5 Table 2. Drug Coverage Rules for State Pharmacy Assistance Programs, 1999 All prescription drugs Drugs for specific conditions Maintenance drugs only Connecticut a Illinois Maryland Delaware Maine (basic) Vermont (VScript) Maine (supplemental) Rhode Island Massachusetts Michigan b Minnesota New Jersey New York Pennsylvania Vermont (VHAP) Wyoming Notes: Except for Illinios and Michigan, states generally do not cover drugs for which they do not get manufacturer rebates. a Connecticut recently eliminated coverage for antihistamines, decongestants, and smoking cessation products. b Michigan limits coverage to three months per year. Source: State programs Unlike private insurers, state programs generally do not use formularies to limit coverage to particular products within a therapeutic class. Formularies are lists of prescription drugs, grouped by therapeutic class, that a health plan or insurer prefers and may encourage physicians to prescribe. A particular product may be included on the formulary because of its medical value or because a favorable price was negotiated with the manufacturer. Several program officials said formularies are not an appealing benefit design structure for their programs because they can restrict access to specific products and can be difficult to administer. According to Director Tom Snedden, Pennsylvania does not cover certain highcost drugs for which a less expensive alternative is available. The state hires a panel of national experts to advise them on which high-cost drugs can be excluded from coverage. Did States Require Program Participants to Share in the Cost? Beneficiary cost-sharing requirements vary among programs (See Table 3). With one exception, the programs impose copayments or coinsurance that require enrollees to share in the drug s cost each time they fill a prescription. In addition to lowering public costs, copayments and coinsurance can influence enrollees to use less expensive drugs. Among these state programs, copayments and coinsurance are more common than benefit caps and deductibles, but the amount of cost sharing varies widely across programs. Wisconsin Family Impact Seminars 17

6 Changing from a flat copayment to a 20% coinsurance cut program costs by 10%. Three programs impose coinsurance that require enrollees to pay a fixed percentage of the cost of a drug, giving enrollees a stronger incentive to use less expensive drugs. Six programs used a flat copayment structure that required enrollees to pay the same amount for each prescription, regardless of cost. Six programs used a tiered copayment structure with higher amounts for more expensive drugs or brand name products than generics. Two programs required enrollees to pay the greater of a coinsurance or a flat copayment. To encourage program beneficiaries to choose less expensive products, the Maine program changed its cost-sharing policy from a flat copayment to a coinsurance amount equal to 20% of the drug s price. A Maine program official estimated that this change cut program costs by 10%. Connecticut, Maryland, and Wyoming have increased their copayments since the programs enactment. Wyoming raised its copay from $1 to $25 per prescription in In 1992, Illinois eliminated the copay and replaced its $800 annual benefit cap with a 20% coinsurance that takes effect once the program pays $800 in benefits during the year. A few programs have annual enrollment fees, but some program officials believe that these fees impose a barrier to program enrollment because they require payment up front. A Minnesota official said enrollment fees in that state were viewed as restricting participation in the program. As a result, the original $120 enrollment fee was eliminated and the monthly deductible was increased by $10. In New York, an enrollment fee was designed to avoid high enrollment. However, the state has since lowered its fees to provide easier access to program coverage. The Connecticut program administrator said the state raised its annual one-time fee from $15 to $25, resulting in enrollment dropping by half. Annual benefit limits and deductibles, which are common in private health insurance, are not often used in state programs because these programs serve needy and low income populations. Only Massachusetts and Delaware place a limit on the total amount of drug costs the program will cover annually. In Delaware, the annual limit is $2,500 per person; in Massachusetts, the limit is $1,250 per person. In Illinois, before reaching $800, enrollees pay a monthly deductible. After reaching $800 in spending for the year, a person must still pay the monthly deductible plus 20% of the prescription s cost. Wyoming covers a maximum of three prescriptions per month, and Michigan allows assistance to enrollees for only three months out of the year. Only four programs have deductibles. New York and Pennsylvania s PACENET have annual deductibles, and Illinois and Michigan have monthly deductibles. 18 How 14 States Have Designed Pharmacy Assistance Programs

7 Table 3. Cost-Sharing Requirements for State Pharmacy Assistance Programs, 1999 State Annual fee Deductible Copayments Coinsurance Connecticut $25 None $12 None Delaware a None None $5 b 25% b Illinois $40 or $80 $15 or $25/mo. None 20% c Maine None None $2 d 20% d Maryland None None $5 None Massachusetts $15 None $3/$10 e None Michigan None None $0.25 None Minnesota None $35/mo. None None New Jersey None None $5 None New York (Fee Plan) $8-$280 f None $3-23 g None New York (Deductible Plan) None $ f $3-23 g None Pennsylvania (PACE) None None $6 None Pennsylvania (PACENET) None $500 $8/$15 e None Rhode Island None None None 40% Vermont (VHAP) None None $1-$2 h None Vermont (VScript) None None $1-$2 h None Vermont (VScript Expanded) None None None 50% Wyoming None None $25 None a Information for the Delaware program is for b Program enrollee pays the greater of the $5 copayment or 25% coinsurance. c After the program enrollee meets the monthly deductible, the program covers all costs up to $800 annually. After that, the individual pays 20% of each prescription s retail cost, and the state pays 80%. d Program enrollee pays the greater of the $2 copayment or 20% coinsurance. e The first amount is for generic drugs; the second is for brand name drugs. f The amount of the fee or deductible is determined on a sliding scale based on income. g The plan has five levels of copayments, which require enrollees to pay a higher amount for higher priced drugs. h Program enrollee pays $1 if the prescription costs less than $30 and $2 if the prescription costs $30 or more. Source: State programs. Wisconsin Family Impact Seminars 19

8 How Were the Programs Funded? Two-thirds of state pharmacy assistance programs received some or all of their funding from the state s general revenues, while nine programs were funded at least in part by other revenue sources, such as a cigarette tax, a construction tax, a tobacco settlement, and, in Pennsylvania, the lottery (See Table 4). Vermont is the only state that receives partial federal funding for enrollees up to 175% of the Federal Poverty Level through the state s Medicaid waiver. Table 4. Funding Sources for State Pharmacy Assistance Programs State Connecticut Delaware Illinois Maine Maryland Massachusetts Michigan New Jersey New York (Fee and Deductible Plans) Pennsylvania (PACE and PACENET) Rhode Island Vermont (VHAP and VScript) Vermont (VScript Expanded) Wyoming Funding Source Tobacco settlement and cigarette tax Construction tax and casino revenue Lottery Cigarette tax and federal funding Cigarette tax Source: State programs 20 How 14 States Have Designed Pharmacy Assistance Programs

9 Did States Get Manufacturer Rebates? State programs, like Medicaid, offset drug spending through manufacturer rebates. Most state programs receive rebates that are calculated using terms similar to the Medicaid rebate agreement established by the Omnibus Budget Reconciliation Act of 1990 (OBRA, 1990). The rebates, often mandated by state legislatures, are usually provided by manufacturers in exchange for coverage of their products and for not subjecting coverage to prior authorization requirements. Like Medicaid, some state programs receive additional rebates if the price of a drug increased more than the consumer price index, which is a measure of inflation. For example, if the average manufacturer price increased 6.3% and the consumer price index rose 2.3%, the manufacturer would pay the 4% difference between the two increases. However, six states said they did not get this additional rebate amount. The Illinois and Michigan programs contract with pharmacy benefit management (PBM) companies to get rebates from manufacturers. Illinois receives 100% of the manufacturer rebates on products with rebate agreements. Michigan receives 80%, while the PBM retains 20% of the rebate. How Were the Programs Administered? Nine of the 14 states administer aspects of their programs through the agency administering Medicaid as shown in Table 5. Programs using Medicaid systems can avoid duplicating program functions, such as determining eligibility and processing claims. Five states administer the program through a different department than the one that administers Medicaid. Program administrators of the three state programs with the largest budgets and the greatest number of participants said that drug assistance programs were intentionally administered apart from Medicaid programs to avoid any perceived stigma attached to Medicaid. Nine of the 14 states administer their programs through the agency administering Medicaid. Wisconsin Family Impact Seminars 21

10 Table 5. Administrative Information on State Pharmacy Assistance Programs State Department administering drug assistance program Same department that administers Medicaid? Same eligibility determination system as Medicaid? Same claims adjudication system as Medicaid? Connecticut Delaware Department of Social Services Department of Health and Social Services Yes Yes Yes Yes Yes Yes Illinois Department of Revenue No No No Maine Department of Human Services Yes No (Dept of Revenue determines eligibility) No, but uses same contractor as Medicaid Maryland Department of Health and Mental Hygiene Yes No Yes Massachusetts Executive Office of Elder Affairs and Division of Medical Assistance Yes, in part a No (Executive Office of Elder Affairs determines eligibility) Yes Michigan Minnesota New Jersey Office of Services to the Aging Department of Human Services Department of Health and Senior Services No No No Yes Yes Yes No No Yes New York Department of Health Same department, separate administration No No Pennsylvania Department of Aging No No No Rhode Island Department of Elderly Affairs No No No Vermont Department of Social Welfare, Office of Vermont Health Access Same department, different office Yes Yes Wyoming Department of Health Yes Yes Yes a The Division of Medical Assistance administers the Medicaid program in Massachusetts. Source: State programs. 22 How 14 States Have Designed Pharmacy Assistance Programs

11 Many program administrators say they cannot determine the extent to which eligible people are enrolled. They can, however, identify factors that may affect whether eligible people enroll, including a perceived stigma associated with programs for low-income people and a lack of awareness of the program. Some state administrators said their legislatures intentionally separated drug assistance programs from Medicaid to avoid perceived stigma. One official whose program is administered through Medicaid said that stigma may affect enrollment, especially among seniors. Some states try to both increase program awareness and decrease perceived stigma through outreach. Eligibility determinations are one major administrative task that the programs perform. Five states used the same eligibility system for their assistance program that is used for the Medicaid program. Nine states used an eligibility system that was different from the one used for Medicaid. In some states, the agency uses a contractor to determine eligibility; in others, eligibility is determined within the administering state agency. To apply, most states have a mail-in application. Only Michigan and Rhode Island require an in-person application interview. Most programs require yearly reapplication, and many automatically send applications to current enrollees. However, participants in Michigan and Wyoming must reapply monthly. Only Rhode Island s participants do not have to reapply once they are enrolled. A few program administrators said developing and coordinating automated systems were challenging aspects of program operation. According to a Connecticut official, setting up systems for claims processing and eligibility determination was difficult. A Rhode Island official said linking relevant computer systems was the most difficult aspect of the program. Because two different systems determined eligibility and processed claims, the two systems had to be linked with one another and with participating pharmacies so pharmacies would know who was eligible and what drugs were covered. Because some people in need of assistance may have other limited drug coverage, all but three states permit people with other prescription drug coverage to enroll in their programs. States excluded people from coverage if they received full Medicaid benefits. Several programs performed a match with Medicaid files to determine whether an applicant was receiving Medicaid benefits. Some administrators said they have encountered added difficulty recovering payments from third-party payers when a person has other drug coverage. For example, when a participant has other drug coverage, Pennsylvania s PACE programs designate the state pharmacy program as the payer of last resort. A Pennsylvania official said the program recently settled a long dispute with several Medicare managed care plans regarding recovery of drug payments that the PACE program made on behalf of individuals with drug coverage through their Medicare managed care plan. According to the PACE official, the program is now cooperating with the Medicare managed care plans to implement a system that will automatically block PACE payments when the person has Medicare managed care coverage. Some legislatures intentionally separated their drug assistance programs from Medicaid to avoid perceived stigma. Wisconsin Family Impact Seminars 23

12 Copayments and coinsurance are more common than benefit caps and deductibles. Conclusion This report features the 14 states that were providing access to prescription drugs for 760,000 elderly and other low income persons in Most programs are funded with the state s general revenue, but some receive earmarked funds. The amount of consumer cost-sharing varies across states. In general, copayments and coinsurance are more common than benefit caps and deductibles. All states obtain manufacturer rebates similar to the terms of Medicaid rebates. Nine of the 14 states administer their programs through the agency administering Medicaid. However, the three largest programs are intentionally administered separately to avoid any perceived stigma of programs for low income people, particularly among seniors. States have encountered administrative challenges in determining eligibility, processing claims, and recovering payments from insurers when program participants have other coverage. This chapter was adapted from a larger report, State Pharmacy Programs Assistance Designed to Target Coverage and Stretch Budgets. Report NO. HEHS The first copy of each GAO report is free. Additional copies are $2 each. A check or money order should be made out to the Superintendent of Documents. VISA and MasterCard credit cards also are accepted. Orders for 100 or more copies to be mailed to a single address are discounted 25%. Orders by mail: U.S. General Accounting Office P.O. Box Washington, D.C Orders by phone: (202) fax: (202) Or, visit GAO s website at: http// Mr. Hansen is an Assistant Director with the Health Care team of the U.S. General Accounting Office (GAO). He is responsible for directing studies and evaluations of Medicare and Medicaid prescription drug benefits, the pharmaceutical industry, prescription drug pricing and utilization, the Food and Drug Administration, and other national health issues. Recent studies conducted under his direction have focused on: considerations for adding a prescription drug benefit to Medicare; state pharmacy assistance programs; drug company patient assistance programs; and the use of pharmacy benefit managers by Federal employee health benefit plans. Mr. Hansen joined GAO in 1974 after receiving a BS in Business Administration and an MBA from the University of Rhode Island. 24 How 14 States Have Designed Pharmacy Assistance Programs